Germany’s unemployment rate slid to a new two-decade low in May, bucking a Europe-wide trend as the financial crisis rages.
The seasonally adjusted jobless rate declined to 6.7 percent from 6.8 percent in April after revisions, the Federal Labor Agency in Nuremberg said today. The number of people out of work was unchanged at 2.87 million. Economists forecast a decline of 7,000, the median of 30 estimates in a Bloomberg News survey showed.
German unemployment fell for 27 straight months until October, when the euro-area debt crisis began to expose gaps in the resilience of Europe’s biggest economy. With exports to Germany’s main European partners sagging, domestic demand is helping to compensate, driving economic growth forecast to be 0.7 percent this year after 3 percent in 2011, Economy Minister Philipp Roesler said April 25.
The “great drops in unemployment of recent years” may now be over, Eckart Tuchtfeld, an analyst at Commerzbank AG in Frankfurt, said by telephone. Still, “despite the shadow cast by the crisis, the preconditions for unemployment to continue falling are still there in the economy, including not-inconsiderable export growth.”
Germany’s joblessness decline to the lowest since reunification has paid multiple dividends, including savings of 32 billion euros ($40 billion) in federal budget outlays in 2011 compared with 2005, when unemployment reached a post-World War II record, the labor agency said in a May 22 report. The trend is also a showcase for Chancellor Angela Merkel’s anti-crisis policy of budget cuts and economic overhauls including labor-market reform.
Germany vs Spain
Unemployment in the 17-nation euro area may average 11 percent this year, twice Germany’s 5.5 percent, the European Commission said on May 11, citing forecasts based on its own criteria. In Spain, where Prime Minister Mariano Rajoy is struggling to rescue the country’s banks amid a recession, unemployment may average 24.4 percent, while Greece, where June 17 elections may determine its future in the euro, faces a jobless rate of 19.7 percent.
Demand for workers in Germany “remains at a high level” and a turning point toward higher unemployment “definitely” isn’t in sight, Frank-Juergen Weise, the labor agency’s head, told reporters in Nuremberg. “Nearly all” industries are experiencing high demand, the agency’s BA-X index of situations vacant showed yesterday. It cited “large numbers” of vacancies in wholesaling and retailing, in health and social services.
Stuttgart-based Robert Bosch GmbH, the world’s largest car-parts marker, may add 2,000 jobs in Germany this year, absorbing an estimated extra 200 million euros in wage costs over 13 months, its human resources chief, Christoph Kuebel, said in a May 24 interview in the Stuttgarter Nachrichten newspaper. “The bigger the wage increase, the more difficult it is to maintain international competitiveness,” Kuebel was cited as saying.
Moderate wage claims that helped the economy climb out of recession in 2009 are being abandoned in industries from banks to engineering. At the same time, the extra money in workers’ pockets is helping bolster private consumption. The Ver.di union won a 6.5 percent wage increase in April for 2 million public-sector workers, while IG Metall, Europe’s biggest union, agreed a 4.3 percent increase for 800,000 workers this month in the state of Baden-Wuerttemberg.
“The German labour market is losing momentum but this is not yet a cause for concern, at least not for this year,” said Carsten Brzeski, a senior economist at ING Group in Brussels. “With a new boost from latest wage settlements, domestic demand might not be a strong, but definitely an important, growth driver.”
Consumer confidence in Germany will hold steady in June, indicating resistance among households to the fallout of the crisis, the GfK SE consumer-sentiment index showed on May 25. While Germans are in a “favorable buying mood,” that “could very quickly be brought to a standstill” if the situation in Greece and the wider euro area deteriorates further, the GfK said.
While “positive trends persist,” in the short-term the “euro crisis is likely to weigh on the labor market,” Christian Schulz, an economist at Berenberg Bank in London, said in a note.
German business confidence suffered its steepest decline in nine months in May, the Ifo economic institute said on May 24. Plant and machinery orders, a bellwether for exports, decreased for a fifth month in March, the VDMA machine-makers’ association said May 3.
Called to Parliament
Unemployment has risen in three of the past eight months after declining for more than two years, prompting lawmakers in Berlin to summon Weise to parliament on May 23 to assess the outlook for joblessness.
Data on joblessness, employment and vacancies are all “in good shape,” he said today. Even so, “it’s unrealistic” to expect “constant big drops” in unemployment.
“Germany’s economic armor is beginning to show the wear and tear of the crisis,” Stephen Webster, chief European economist at 4Cast Ltd. in London, said in an interview. “And unemployment is not immune.”